Difficult to pinpoint extent of EV home speculators
by Art Thompson
Jan 31, 2005, 10:52am

Attention Gilbert investors.

There is a real estate phenomenon expanding faster than the land-value bubble.

It's a lot of hot air spewing from so-called experts about speculators in the housing market. advertisement

"There's a lot of buzz about it right now," said RL Brown, a Sun City-based housing market analyst. "Everyone is focused on it. The media, builders."

It is difficult to ascertain what's really going on with respect to investors from California, Nevada or wherever taking advantage the rapid appreciation in value of our relatively low-cost housing

Particularly when prominent real estate forecasters like Brown and economist Elliott Pollack of Scottsdale are in disagreement over the number and the impact of out-of-towners buying homes purely for investment in the local market.

"Twenty percent of the market is speculators," Pollack said during an interview Wednesday after he addressed the 41st annual Arizona State University/Bank One Economic Forecast luncheon at Phoenix Civic Plaza.

Nobody can say with certainty how much of an affect speculators are having on real estate values in Gilbert and elsewhere, he said. But such investors are changing the way builders project future housing demand for their products.

"Investors are making it difficult to look at traditional ratios and come up with numbers," he said. "The nature of Gilbert housing will be upper income. It will be difficult to buy $150,000 homes as affordable housing moves to the West Valley and Pinal County."

Myriad factors are used to calculate the number of new homes needed to accommodate growth, both Brown and Pollack say.

But Pollack contends that it's no longer prudent to divide the population growth figure by the average family size, 2.8, to project housing needs.

"The figure is lower than 2.8 or the population flows are higher than anticipated," he said.

Exactly how much of that change can be attributed to speculators is not known, Pollack said.

But Brown said nobody knows the answer, period, because nobody knows how many investors are in the market in the first place.

Although Brown thinks the problem is being overblown, he said it's there and hard to pin down.

"Nobody has a clue," he said, "Today, last month or 10 years ago. There's no way they can tell."

Which gets us to the part about the lies.

"Theoretically," Brown said, "the way you know (investor numbers) is when a guy purchases a house, he signs an affidavit of value. One of the blanks you fill in is whether you're both owner and occupant."

Checking the owner-only box is an indication that the buyer is living elsewhere and purchased the property to rent or as an investment for other purposes.

"If you go by the assessor's office and look at those boxes, it looks as if very few investors are coming in," he said. "Because they are lying.

"Years ago, an audit by the assessor uncovered fraud in connection with the same type of thing. Now you're going to get a chance to do it all over again. If you look at affidavits filed in the last few years, you'll find very few who are fessing up. That's the reason you can't tell how many investors are in the market."

There's also a significant market of purchases of second homes. That includes the snowbirds and East Valley residents buying homes in the state's cooler climes.